What is a Sole Proprietorship?
- Business run by one person
- No separate legal personality
- Owner bears all risks and owns all assets
- Pays tax as an individual
A Sole Proprietorship is the simplest form of business structure.
What is a Partnership?
- Contractual relationship for joint profit
- No separate legal personality
- Partners share profits, risks, and ownership
Partnerships are formed through agreements and can be oral, written, or tacit.
What are the key features of a Close Corporation (CC)?
- Governed by Close Corporations Act 69 of 1984
- Separate legal personality
- Limited liability
- Perpetual succession
- Max 10 members who manage the CC
A CC provides a more flexible structure than a company.
What defines a Company?
- Juristic person with separate legal personality
- Endorsed by law to acquire rights/duties
- Perpetual succession
- Limited liability
- Managed by a board of directors
Companies are more complex and regulated compared to other business forms.
What is the legal personality of a Sole Trader?
None
A Sole Trader does not have a separate legal identity from the owner.
What is the liability of a Partnership?
Joint & Several
Partners are personally liable for the debts of the partnership.
What type of taxation applies to a Close Corporation?
Entity (separate tax)
A Close Corporation is taxed as a separate entity.
What is the continuity of a Sole Trader?
Ends with owner
The business ceases to exist if the owner dies or withdraws.
What are the rights of Partners in a Partnership?
- Share profits
- Access information
- Participate in management
These rights are essential for the functioning of a partnership.
What is a Natural Person?
Human being with legal capacity
Natural persons can enter into contracts and own property.
What is a Juristic Person?
Entity with separate legal personality (e.g., company, trust)
Juristic persons can sue and be sued in their own name.
What is Limited Liability?
Shareholders/members not personally liable for entity’s debts
This protects personal assets from business liabilities.
What does Perpetual Succession mean?
Continuity despite membership changes
This is a key feature of companies and close corporations.
What are the contractual requirements for forming a Partnership?
- Consensus
- Capacity
- Lawful object
- Possibility
These requirements ensure that the partnership is valid and enforceable.
What are the essentialia of a Partnership?
- Intention to partner
- Contribution to business
- Sharing of profits (and losses by default)
These are mandatory elements for a valid partnership agreement.
What is the liability of partners to third parties?
Jointly and severally liable for partnership debts
Creditors can pursue both partnership and personal assets for debts.
What are the grounds for dissolution of a Partnership?
- Agreement
- Expiry of time
- Change in partners
- Court order
- Insolvency
These grounds can lead to the end of the partnership.
What is the consequence of dissolving a Partnership?
- Mutual mandate ends
- Assets liquidated; debts paid
- Surplus distributed to partners
The dissolution process ensures that all financial matters are settled.
True or false: A Close Corporation has unlimited liability.
FALSE
Close Corporations offer limited liability to their members.
What is the viability of a Partnership?
Suitable for small ventures; lacks limited liability
Partnerships are often chosen for their simplicity and flexibility.
